SECTION27 STATEMENT ON THE PROMULGATION OF PROVISIONS OF THE COMPETITION AMENDMENT ACT, 2009

SECTION27 STATEMENT ON THE PROMULGATION OF PROVISIONS OF THE COMPETITION AMENDMENT ACT, 2009

11 MARCH 2013

SECTION27 welcomes the promulgation of section 6 of the Competition Amendment Act 1 of 2009 (“Amendment Act”) by proclamation published in the Government Gazette on Friday, 8 February 2013. The proclamation brings into force the provisions related to a market inquiry, which will come into force on 1 April 2013.

The new provisions provide a legal framework for the conduct of a market inquiry – a broad investigation into a sector or market as a whole, in the absence of a complaint about the conduct of any one firm – by the Competition Commission (“Commission”).

About a year ago, the Commission announced its intention to conduct an inquiry into the private health care sector in terms of its general powers to promote and maintain competition in the market. In light of the high cost of services in the private health sector, including the cost of specialists, laboratory services and hospital services, this inquiry is crucial for consumers who use the private health system and who often face high out-of-pocket payments that are not covered by their medical aid schemes. Such an inquiry will seek information about how prices are determined and consider the impact on competition in the market, uncovering the underlying causes of price distortions and the real drivers of medical inflation.

The Commission began consulting with a range of stakeholders and conducting initial research into the sector, but recently stated that it would rather proceed with this inquiry within the scope of the provisions of the Amendment Act.

The provisions that will come into force on 1 April 2013 will provide the Commission with additional powers in conducting its market inquiry into the private health care sector, including the power to call witnesses to provide relevant information and documents to the inquiry. This sector, unlike the banking sector, is complex, and there is no doubt that the Commission will benefit from the clear legal framework setting out its powers. This will provide certainty to the Commission, the industry players, and to members of the public who wish to contribute to the process. In our view, the provisions serve to support an effective and meaningful market inquiry into the private health sector.

The Amendment Act states that, following a market inquiry, the Commission may initiate a complaint against individual players in the sector on the basis of the outcomes of the market inquiry. The Commission may also make recommendations for new policy, legislation or regulations, or amendments to the existing legal framework. In other words, the Commission can make recommendations to the Department of Health about how to deal with the underlying causes of the escalating costs of health care and increase access to health care services in the private health sector. These could include recommendation on what steps should be taken by the relevant authorities to address the identified problems; new or amended policies, legislation or regulations that should be introduced to remedy the identified problems; or what models of regulation the government should consider in order to regulate the pricing of health services in the private sector.

The Minister of Health has publicly addressed the need to reign in the cost of health care services in order to expand access to health care services. In terms of section 27 of the Constitution, the state has a duty to take reasonable legislative and other measures to ensure the progressive realisation of the right to have access to health care services for everyone in South Africa, including in the private sector.

The market inquiry should be conducted in an open and transparent manner and should be open to the public, while having regard to potentially sensitive information held by the various stakeholders. Members of civil society that are concerned with the pricing of private health services should be able to engage with the Commission and should take the opportunity to play a meaningful role in finding solutions to the high cost of private health care in South Africa.

Background

The Amendment Act, which was passed into law by Parliament in 2009, introduces the concept of a ‘market inquiry’, which is defined as ‘a formal inquiry in respect of the general state of competition in a market for particular goods or services, without necessarily referring to the conduct or activities of any particular named firm’. In other words, the Commission is empowered to conduct an inquiry into the whole or part of an industry in the absence of a specific complaint about any firm(s). The Amendment Act provides that the Commission may undertake such an inquiry on its own initiative or in response to a request from the Minister of Economic Development, even when there is no reason to believe that there are specific anti-competitive features in a market.

During the passage of the Amendment Act through Parliament, a number of interested parties raised concerns about the market inquiry. In particular, some raised the concern that an enquiry could lead to a ‘fishing expedition’ in a market without sufficient justification. Others were concerned that an enquiry could go on for long periods, because the timeframes for the conduct of a market inquiry are not prescribed in the Act. While there was some debate on these issues, the majority of the debate focused on the concerns raised about the constitutionality of the provisions that dealt with complex monopolies and the criminalisation of the conduct of directors and managers of firms who engage in cartels.

The provisions that will come into force on 1 April 2013 will provide the Commission with additional powers in conducting its market inquiry into the private health care sector, including the power to call witnesses to provide information to the inquiry under oath.

The Commission conducted an inquiry into the retail banking sector a few years ago. It was able to undertake that inquiry because it has the power to promote and maintain competition in South Africa, in order to, for example, provide consumers with competitive prices and product choices. In addition, the major banks all participated in the inquiry on a voluntary basis. The inquiry had a positive impact for consumers, partly due to the spotlight that was placed on the pricing of retail banking services in South Africa.